The Reserve Bank of New Zealand published the results of its 2024 General Insurance Industry Stress Test, assessing how insurers would respond to a major earthquake and severe but plausible cyber incidents. The exercise found that policyholder claims would have been met even under an extreme seismic scenario, but that insurers would have required substantial mitigating actions to restore solvency positions. The earthquake scenario modelled a magnitude 8.7 event on the Hikurangi Subduction Zone and was calibrated well beyond solvency requirements to test preparedness and recovery plans, with widespread damage and a sharp decline in GDP. Participating insurers estimated NZD 62 billion in property losses, rising to around NZD 100 billion when extrapolated to the whole market; capital injections from parent companies and ongoing reinsurance capacity were identified as critical to maintaining coverage after such an event. The stress test also flagged broader Crown exposure, including Natural Hazards Commission funding and the cost of repairing uninsured assets and any economic support programmes, underscoring the importance of sufficient fiscal buffers. Cyber scenarios covered a major data breach, a critical cloud services outage and a ransomware attack, with insurers showing resilience to claims impacts but potential material hits to profitability. Insights from the exercise will feed into the Reserve Bank’s review of solvency standards and its recovery planning, and it will continue working with insurers and relevant government agencies on preparedness for seismic and cyber risks.

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